General Transitional Rules for Ontario HST
The 2009 Ontario Budget proposed a comprehensive package of tax changes. Central to this tax package is the proposed Harmonized Sales Tax (HST) in Ontario which, subject to legislative approval, would come into effect on July 1, 2010. The proposed HST rate for Ontario would be 13 per cent - combining the existing 5 per cent Goods and Services Tax (GST) with an 8 per cent Ontario component. The HST would be administered by the Canada Revenue Agency.
The province is providing details of proposed measures that would build on the comprehensive tax package and help consumers and businesses transition to the HST. These measures are described in the Information Notice: General Transitional Rules for Ontario HST, dated October 14, 2009.
The transitional rules set out which tax would apply - the current Retail Sales Tax (RST) or the Ontario portion of the HST - for transactions that straddle July 1, 2010.
- July 1, 2010 - Implementation of the HST in Ontario:
- May 1, 2010 - The HST would apply to amounts that are paid or payable on or after this date for goods or services provided on or after July 1, 2010.
- October 14, 2009 - Certain businesses and public service bodies may be required to self-assess the Ontario component of the HST on amounts paid or payable after this date and before May 2010 for goods or services provided on or after July 1, 2010.
- October 31, 2010 - This is the date on which any outstanding RST would become payable under the transitional rules to ensure an efficient wind down of the RST.
GOODS AND SERVICES
The RST will apply to the taxable sale of goods when the goods are delivered, or ownership of the goods is transferred, to the purchaser before July 1, 2010. The HST would generally apply to goods when the goods are delivered, and ownership is transferred, to the purchaser on or after July 1, 2010.
The RST will apply to the portion of taxable services performed before July 1, 2010. The HST would generally apply to the portion of services performed on or after July 1, 2010. The HST would not generally apply, however, to a service where substantially all (90 per cent or more) of the service is performed before July 2010 - in which case the RST would continue to apply where applicable.
The Information Notice also describes specific transitional rules for funeral and cemetery services, passenger transportation services, freight transportation services, and prepaid subscriptions to newspapers, magazines and other periodicals.
LEASES AND LICENCES
The RST would generally apply to a supply of taxable goods by way of lease, licence or similar arrangement for the part of a lease interval that occurs before July 1, 2010. The HST would generally apply to a supply of property - including certain goods and non-residential real property - for the part of a lease interval that occurs on or after July 1, 2010.
However, the RST would continue to apply, and the HST would not apply, to a lease interval that begins before July 2010 and ends before July 31, 2010.
Commercial parking would be treated as a lease under the transitional rules.
INTANGIBLE PERSONAL PROPERTY
The HST would generally apply to consideration that is due or paid on or after July 1, 2010, for a supply of intangible personal property (e.g., intellectual property) by way of sale. However, in some cases the transitional rules for leases and licences may apply. The details are described in the Information Notice.
OTHER TRANSITIONAL RULES
Specific transitional rules are proposed for certain other circumstances, including those in respect of direct sellers, continuous supplies, budget payment arrangements, combined supplies, progress payments, goods brought into Ontario, imports, and returns and exchanges. The details can be found in the Information Notice.
WIND DOWN OF RST
On July 1, 2010, the existing RST would generally cease to apply.
Final RST returns would generally need to be filed by July 23, 2010. In addition, if an RST amount is collected or becomes payable after June 2010, the vendor would be required to account for that amount in a supplemental RST return to be filed on or before the 23rd day of the following month. All supplemental RST returns would need to be filed no later than November 23, 2010.
Existing assessment, objection, appeal and enforcement provisions under the RST legislation would generally remain in place where the applicable limitation periods have not expired.
TRANSITIONAL RST INVENTORY REBATE FOR RESIDENTIAL REAL PROPERTY CONTRACTS
A rebate would be available for RST embedded in construction materials that are used in residential real property contracts where the HST applies. The rebate application would need to be filed on or before December 31, 2010 and certain other conditions would apply.